Why Don't Asians Invest in Asia? The Determinants of Cross-Border Portfolio Holdings
AbstractThis paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyze empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies, emerging market economies, European economies, and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region. (c) 2009 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Asian Economic Papers.
Volume (Year): 8 (2009)
Issue (Month): 3 (October)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Alicia Garcia Herrero & Philip Woolbridge & Doo Yong Yang, 2009. "Why don't Asians invest in Asia. The determinants of cross-border portfolio holdings," Working Papers 0908, BBVA Bank, Economic Research Department.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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- Vahagn Galstyan & Philip Lane, 2010. "The Dynamics of Portfolio Holdings in Emerging Europe," The Institute for International Integration Studies Discussion Paper Series iiisdp346, IIIS.
- Yohei Okawa & Eric van Wincoop, 2010.
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- Olaf Unteroberdoerster & Runchana Pongsaparn, 2011. "Financial Integration and Rebalancing in Asia," IMF Working Papers 11/243, International Monetary Fund.
- Azis, Iwan J., 2013. "Inadequate Regional Financial Safety Nets Reflect Complacency," ADBI Working Papers 411, Asian Development Bank Institute.
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